Don’t give up on China banks. Chinese stocks overall are in the doldrums, and banks recently took a hit when Chinese authorities cracked down on widespread use of ill-designed “wealth management” products. However, BOCOM International maintains a long-term buy rating on five banks.
The securities firm, an arm of China’s Bank of Communications, recommended in a research note Wednesday that investors stay defensive in banks for the time being, noting more regulations on the so-called “shadow banking” sector may be in the pipeline. But it said, “The regulation of wealth management products is negative for the sector in the short term but long-term beneficial.”
Two banks whose shares have tumbled in the wake of the crackdown on wealth management products, CITIC Bank (CHCJY) and Minsheng Bank (CMAKY), can redesign the problem measures to get them in line with regulations during a grace period provided by authorities, BOCOM International said.
The brokerage is keeping its long-term buy recommendation for Minsheng and CITIC Bank, as well as for Bank of China (BACHY), Chongqing Rural Commercial Bank (CRCBY) and China Merchants Bank (CIHKY).
China Merchants recently reported that 2012 profits rose 25% as credit costs declined substantially and loan quality improved partly due to a rise in the proportion of non-mortgage personal lending. BOCOM International raised its earnings forecast for 2013/2014 by 2.5%/3.6%. End
Hong Kong Blue Chips: -30, -0.1, to 22,337, 4-3-13, Hang Seng Index.
Chinese Stocks in Hong Kong: -53, -0.5%, to 10,759, 4-3-13, HSCE Index.
Shanghai Stocks: -2, -0.1%, to 2,225, 4-3-13, Shanghai Composite Index.
Chinese Stocks in the U.S.: +2.8, 369.9, 4-2-13, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong opened higher in line with Wall Street’s record close, but ended with a slight decline in thin trading as Mainland markets weakened and investors showed caution ahead of Thursday’s holiday. KGI Research
Quotable: “We maintain our overweight recommendation on Chinese banks and property developers.” Guoco Capital. 4-3-13
Brokerages and analysts cited here have disclaimers on their websites emphasizing their statements are for information only. They do not endorse my blog, and I don’t endorse them.
For a list of Chinese companies sold in the U.S. and information on each company go to http://www.adrbnymellon.com/dr_country_profile.jsp?country=CN